REGULATORY NEWS - Alcoa to meet with CFTC head to talk warehousing reforms

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Tom Jennemanntom.jennemann@fastmarkets.comSenior North American Correspondent973-204-3383

Winter Park, Florida 25/08/2015 - Alcoa is scheduled to meet with the chairman of the Commodity Futures Trading Commission (CFTC) on Wednesday to discuss London Metal Exchange's proposed warehousing reforms, a company spokesperson confirmed.

In a July 27 letter, Alcoa general counsel Max Laun requested a meeting, while also accusing the CFTC of "overstepping its authority" in attempting to influence the LME's warehousing reform by delaying the exchange's application for registration as a Foreign Board of Trade (FBoT).

The CFTC in March informed the LME that it would delay its FBoT review until the exchange makes further progress in reducing warehouse queues and easing concerns related to pricing for aluminium. The CFTC specifically supported the LME's queue-based rent capping (QBRC) proposal as the alternative "having the greatest potential to reduce queues".

In July, the LME launched a consultation on its QBRC proposal, saying that it has "significant support" from regulators in the US. This led many market participants to believe that the QBRC rule was a direct mandate from the CFTC - a view shared by Alcoa.

At the meeting on Wednesday, Alcoa Chief Financial Officer Bill Oplinger will request that CFTC chairman Timothy Massad and the agency as a whole refrain from intervening in the LME proposed rule changes, the spokesperson said.

Prior to 2011, foreign exchanges such as the LME operated in the US under no-action letter relief granted by the CFTC. But as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules have changed. The LME now must become an official FBoT, which gives the CTFC more authority to investigate the LME's electronic trading and warehousing system.

During the FBoT application process that started in 2012, the LME must prove that it possess all the attributes of an organised exchange, including rules that prohibit abusive trading practices and effective systems that promote financial integrity.

(Additional reporting by Perrine Faye)



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